How India-based groups are redefining Outbound Direct Investments

How India-based MNEs are transforming outbound direct investments with a 67% surge in FY25 driven by ESG, tax reforms, geopolitics & GIFT City advantages.

Key takeaways

Geopolitics, need to secure supply chains, and preferential access is pushing Indian companies to diversify, leading to increase in Overseas Direct Investment (ODI).
Treaty revisions on taxes, pressure from international tax authorities on substance and ESG considerations are prompting a shift to new jurisdictions.
GIFT City offers financial insurance and treasury benefits to Indian-headquartered groups, enabling effective management in India while enjoying advantages similar to other jurisdictions.
To structure outbound investments, regularly review structures to ensure underlying assumptions are still valid.
Staying updated with the evolving concept of substance, ESG regulations, and trade agreements is essential for long-term sustainability and compliance.

Success in this new global order will be for those who move early, who build adaptable structures and treat compliance as a catalyst, and not as a constraint.

Vaibhav Luthra

Tax Partner, EY India

For your convenience, full text transcript of this podcast is available below.

Pallavi

Hello and welcome to the EY India Insights Podcast! I am your host, Pallavi, and today we are diving into a topic that’s gaining massive momentum—India’s Outbound Direct Investments and how Indian multinational enterprises are rethinking their global strategies in a rapidly evolving world.

To help us unpack the latest trends and insights, I am joined by Vaibhav Luthra, Tax Partner at EY India, who actively focuses on Outbound investments for India-headquartered groups. He will also walk us through key findings from our July 2025 report, India abroad: Navigating the global landscape for overseas investment.

Vaibhav, welcome to our podcast!

Vaibhav Luthra

Thank you. Great to be here and excited to discuss this timely topic.

Pallavi

Thank you. To begin with, Vaibhav, India's outbound investments have surged by over 67% in FY 2024 to FY25. So according to you, what are the key drivers behind this growth and how are Indian MNEs (multinational enterprises) shaping their global investment strategies in response to the shifting geopolitical and economic dynamics?

Vaibhav Luthra

Absolutely, Pallavi, I think the numbers are remarkable. We saw ODI jump from around US$25 billion to around US$42 billion. And it reflects a strategic transformation. I believe there are three forces which are driving this. First, because of what's happening in geopolitics and the realignment, it is pushing Indian companies to look for newer markets and diversify. Markets in Southeast Asia, Africa and Middle East offer some of them these benefits and are markets where they can go.

Second is, energy transition, from the fact that India is dependent upon imports for meeting its energy requirements. Indian firms are making significant bets globally. Be it solar projects in Africa or Lithium extraction in South America. They are securing supply chains for India's clean energy future.

And third is market access. We are hearing about tariff discussions in US, which is iterating probably almost every day now. The good part is the India UK FTA got concluded. So, basis that, Indian-headquartered companies are positioned to replace this preferential access.

And I would just say that they are not just responding to global developments, they are rather reshaping their footprint to be more resilient and future ready.

Pallavi

Thank you, Vaibhav. Now we see a clear movement away from the traditional jurisdictions like Malaysia and Singapore towards the newer options like the UAE, Luxembourg and Switzerland. What is really prompting the shift and how are tax efficiencies, regulatory changes and ESG priorities influencing these decisions?

Vaibhav Luthra

Again, great observation. I would say there are some factors driving this. In the last decade or so, if you observe, traditionally, jurisdictions like Mauritius, Singapore, Cyprus used to offer tax advantages. But that has been, I would say, kind of plugged because of treaty revisions.

And also, pressure is coming from international tax authorities and communities in terms of substance and substance is playing actually a very important role, which has been one of the key pillars of the BEPS project, which was taken by OECD a few years back. So, with regard to substance and of course now ESG considerations have also come in.

So the Indian-headquartered groups are actually looking at jurisdictions which can offer them these commercial regulatory tax advantages. But at the same time, it should be offering them some kind of framework where they can also meet these ESG considerations as well as substance so that the structures are foolproof.

Pallavi

Thank you, Vaibhav. Another interesting trend that we noticed is that the GIFT City is emerging as a strong contender for holding in a treasury operations. So what strategic advantages does it offer for Indian companies, and how does it compare with offshore hubs in terms of cost compliance and operational flexibility?

Vaibhav Luthra

I would say GIFT City is a genuine gamechanger. When this whole concept came in, the idea was to really look at the financial insurance and the groups with treasury operations. As we see the expansion in terms of the activities for which the companies can be set up, it really is giving benefits for Indian-headquartered groups, because what's unique is that, companies can maintain their place of effective management in India while continuing to enjoy the same benefits as may be offered by some of the foreign jurisdictions. And this has been one of the key concerns, because place of effective management has been a concern for a number of Indian-headquartered groups, especially in recent years.

So, as the GIFT City offers them a 10-year tax holiday, it's obviously business friendly. So, from a cost compliance standpoint, you don't need to have a separate setup outside of India. You can maintain the set-up here itself, which means, reduced complexity, faster decision-making while being in India.

This is offering them a real advantage in terms of being future-ready. And I would just say that it aligns with evolving global standards on substance and transparency.

Pallavi

Thank you, Vaibhav, and finally, what are the top strategic considerations that Indian MNEs should bear in mind while structuring their outbound investments in this evolving global environment?

Vaibhav Luthra

Again, an excellent question, Pallavi. I would like to highlight a few considerations. Usually, what you observed is that when a structure is set up, there are certain assumptions that go in to setting up a structure. But usually after 2 or 3 years, no one really goes back and check whether those assumptions which were being, taken as underlying, whether they are being followed in real or not.

So first and foremost, it becomes a periodic review of structures, which is whether the assumptions at the time of being set up, are they being followed or not. Second, of course, we discussed that substance is an evolving concept. Jurisdictions are introducing measures to ensure that we continue to meet those requirements. So that, again, is non-negotiable. That also needs to be retested on a periodic basis. Third is on the diversification of supply chain. Of course, developments like revised US tariffs and India-UK Free Trade Agreement create opportunity; no doubt on that. But at the same time, companies should consider the impact on supply chains, whether it is through indirect taxes or the incentives.

Last, I would say it's ESG considerations, especially with EU introducing measures to probably make an attempt to have an attack on foreign MNCs doing operations in EU, whether it's steel companies, aluminum or cement. I think these factors would also need to be embedded in investment decisions.

So I would just say that the success in this new global order will be for those who will move early, who will build adaptable structures and treat, compliance as a catalyst, and not as a constraint.

Pallavi

Thank you so much for spending your time and sharing those incredibly insightful perspectives and breaking this down so clearly for our listeners.

Vaibhav Luthra

Thank you. Thank you so much for having me.

Pallavi

Thank you. And to all our listeners. That brings us to the end of this episode. Thanks for tuning in. And if you want to dive deeper into the insights or download the report, please do visit our website at ey.com/in or check the link in the episode description.

Until next time, this is Pallavi signing off.

Presenters

Vaibhav Luthra
Tax Partner, EY India

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Duration

9m 51s

How Indian companies are redefining global investment strategies

Indian businesses are expanding globally, focusing on sustainability, ESG, regulatory shifts, and new markets like the UAE and GIFT City.

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How India-based groups are redefining Outbound Direct Investments

Key takeaways

Pallavi

Vaibhav Luthra

Pallavi

Vaibhav Luthra

Pallavi

Vaibhav Luthra

Pallavi

Vaibhav Luthra

Pallavi

Vaibhav Luthra

Pallavi

Vaibhav Luthra

Pallavi

Presenters

How Indian companies are redefining global investment strategies

Indian businesses are expanding globally, focusing on sustainability, ESG, regulatory shifts, and new markets like the UAE and GIFT City.